Michigan Supreme Court Lansing, Michigan
Chief Justice: Justices: Clifford W. Taylor Michael F. Cavanagh Elizabeth A. Weaver Marilyn Kelly 

# Opinion

Maura D. Corrigan Robert P. Young, Jr. Stephen J. Markman

FILED MAY 7, 2008 RANDALL L. ROSS, Plaintiff-Appellee,

v No. 130917 AUTO CLUB GROUP, Defendant-Appellant.

BEFORE THE ENTIRE BENCH KELLY, J. This case arises out of a dispute over no-fault benefits. Plaintiff Randall Ross was injured in an au tomobile accident and submitted a claim for work-loss benefits to defendant Auto Club Group, his no-fault in surer. Defendant denied plaintiff’s claim, prompting him to file this lawsuit. The trial court not only awarded plaintiff benefits, but also awar ded attorney fees. Th e Court of Appeals affirmed. We granted defendant’s application for leave to appeal. We hold that the trial court properly awarded plaintiff work -loss benefits. But it clearly erred when deciding that defendant’s refusal to pay benefits was not based on a legitimatequestion of statutory interp retation. As a c onsequence, we affirm the Court of Appeals judgment that plaintiff is entitle d to work-loss benefits, but reverse its affirmance of the award of attorney fees.
I. F ACTS Plaintiff was injured in an automobile accident. At the time of the accident, he was the sole shareholder and sole em ployee of Michigan Packing Company, Inc. Plaintiff had incorporated this entity under the Busi ness Corporation Act (BCA) 1 and, for federal tax purposes, had f iled an election und er subchapter S of the Internal Revenue Code. 2 As a result of his injuries, plaintiff wa s unable to work. He made a claim to defendant for work-loss ben efits. In support of his claim, plaintiff provided defendant with W-2 forms showing that Michigan P acking had paid plaintiff wages in 2001 through 2003. 3 Defendant denied plainti ff’s claim. It relied on the benefit-calculation methodology set forth by the Court of Appeals in Adams v Auto Club Ins Ass’n. 4

1 MCL 450.1101 et seq. 2 Subchapter S of the Internal Reve nue Code, 26 USC 13 61 through 1379, allows a qualifying corpora tion to avoid federal taxatio n at the corporate level, instead creating a “pass-through” of income that is taxed at the shareholder level. Chocola v Dep’t of Treasury , 422 Mich 229, 236; 369 NW2d 843 (1985). 3 Michigan Packing paid plaintiff wages of $16,20 0 in 2001, $11,250 in 2002, and $12,150 in 2003. 4 Adams v Auto Club Ins Ass’n, 154 Mich App 186; 397 NW2d 262 (1986).

2Defendant concluded that plaintiff had faile d to establish a claim for lost income because Michigan Packin g operated at a loss during the years at issue. 5
Plaintiff filed this laws uit on May 6, 2004. Th e trial court granted his motion for summary disposition, ruling that he was entitle d to work-loss benefits based on his wages. The court also awarded attorney fees under MCL 500.3148(1), the no-fault act ’s attorney-fee provision. It found that defendant had unreasonably delayed making payment to plaintiff. Defendant moved for reconsideration. The trial court denied th e motion, and defendant appealed in the Court of Appeals. The Court of Appeals affirmed in a publis hed opinion. 6 It held that the trial court had properly rejected the benefit -calculation methodol ogy proposed by defendant and had correctly granted benefits base d on plaintiff’s wages. 7 The Court of Appeals also held that the tr ial court had not cl early erred by awarding attorney fees. 8 It found defendant’s denial unreasonable because defendant had relied on a case having facts dissimilar to th ose of this case. Moreover, plaintiff

5 Michigan Packing lost $21,828 in 20 01, $28,179 in 2002, and $35,208 in 2003. 6 Ross v Auto Club Group , 269 Mich App 356; 711 NW2d 787 (2006). 7 Id. at 361-362. 8 Id. at 362.

3had supplied W-2 forms supporting his claim. 9 The Court deni ed defendant’s motion for reconsideration. Defendant applied for leave to appeal in this Court. Initially, we denied the application, but later grante d defendant’s motion for recon sideration. On March 7, 2007, this Court heard oral argument concerning wh ether “the Court of Appeals correctly affirmed the trial cour t’s award of attorn ey fees to plaintiff pursuant to MCL 500.3148(1).” 10 After hearing argument on the application, we granted leave to appeal to cons ider both the attorney-fee issu e and the benefits issue. 11
II. S TANDARD OF R EVIEW This case requires us to decide whether the lower courts properly interpreted the no-fault act in determini ng that plaintiff is entitled to work-loss benefits. Issues of statutory interpretation are reviewed de novo. 12
We also review the award of attorney fees. The no -fault act provides for attorney fees when an insurance carrier unreasonabl y withholds benefits. 13 The trial court’s decision about whether the in surer acted reasonably involves a mixed question of law and fact. What constitutes reasonableness is a question of law, but

9 Id. at 363-364. 10 477 Mich 960 (2006). 11 478 Mich 902 (2007). 12 People v Barbee , 470 Mich 283, 285; 681 NW2d 348 (2004). 13 MCL 500.3148(1).

4whether the defendant’s deni al of benefits is reasonable under the particular facts of the case is a question of fact. 14 Whereas questions of law are reviewed de novo, a trial c ourt’s findings of fact are reviewed for clear error. 15 A decision is clearl y erroneous when “the reviewing court is left with a definite and firm convic tion that a mistake has been made.” 16
III. W ORK -L OSS B ENEFITS The issue concerning work-loss benefits is one of first impression. It is whether someone can recover work-loss be nefits under MCL 500.3107(1)(b) if he or she is the sole employee and shareholder of a subchapter S corporation that lost more money than it paid in wages. Defendant contends that plaintiff, who is such a person, is not entitled to benefits. D efendant points out that a subchapter S corporation’s profits and losses pass through to the shareholders for tax purposes. Accordingly, it argues, plaintiff should be treated like an un incorporated sole proprietor, which means that , when his income is cal culated, his gross receipts must be reduced by his business expenses . The Court of Appeals rejected this argument. In holding that the corp oration’s losses were i rrelevant to computing plaintiff’s work-loss benefits, the Court of Appeals stated:

14 See Sweebe v Sweebe , 474 Mich 151, 154; 7 12 NW2d 708 (2006). 15 Id. 16 Kitchen v Kitchen , 465 Mich 654, 661-662; 641 NW2d 245 (2002).

5In this case, there is no disp ute that (1) plaintiff received wages as an employee of the cor poration and (2 ) plaintiff’s remuneration from th e corporation was not determined on the basis of the annual net income of the corp oration. Plainti ff did not assert a work-loss claim based on the lost pr ofits of the corporation. These facts distinguish this case from Adams. We reject defendant’s argument that plaintiff’s sel f-employment status dictates a calculation of the gross receipts of the corporation less the corporate expenses to determine plaintiff’ s net income. We emphasize that plaintiff as an individual recei ved wages and was not remunerated on the basis of the gross receipts of the corporation. Defendant presents no evidence to justify the disregard of the long-held rule that “‘[t]he corporate entity is distinct although all its stock is owned by a single individual or corporat ion.’” Moreover, “[a corporation’s] separate existence will be respected , unless doing so would subvert justice or cause a result that woul d be contrary to some other clearly overriding public policy.” Beca use plaintiff received wages from the corporation, and because defenda nt has presented no evidence to the contrary, the business expenses of the corporation are irrelevant in calculating plaintiff’s wage loss, a nd plaintiff is trea ted as being in no different position than an employ ee of any othe r corporation operating at a loss. The trial court correctly determined that plaintiff was entitled to work-lo ss benefits and properly granted his motion for summary disposition. [17] We conclude that the Court of App eals reached the right result for the right reasons. Accordingly, we affi rm its decision and hold th at plaintiff is entitled to work-loss benefits based on his wages. Justice Corrigan argues in her partia l dissent that defendant has created a factual question regarding the amount of pl aintiff’s loss of income from work. This ignores the legitimate distinction between a shareholder and the corporate entity that is established by Michigan law. What Jus tice Corrigan says about the nature of a subchapter S corp oration is true: for federal income taxa tion purposes,

17 Ross , 269 Mich App at 361- 362 (emphasis in origin al; citations omitted).

6the income and lo sses of a subchapter S corporation pass through to the individual shareholders as if the income and losses belonged to the me mbers of a partnership. But her “income” analysis errs by suggestin g that the blurring of corporate and shareholder identities fo r federal taxation purposes also blurs the separate legal identities created for those entities by the BCA. Indeed, the authority she relies on made clear that, for federal taxation purposes alone, a subchapter S corporation is merely analogous to a partnership or a sole proprietorship. There is no authority for Justice Corri gan’s proposition that the distinct corporate identity created by Michigan law may be ignored. The corporation’s income or losses are not the shareholder’s income or losse s for purposes of the no

fault act’s work-loss-benefits provision . Neither the BCA no r the no-fault act supports her analysis. Thus, her stat ement that “plaintiff and his wife had no taxable income in 2001, 2002, and 2003” 18 entirely misses the central point: regardless of whether he was subject to taxation under federal law, plaintiff indisputably received actual income in th e form of W-2 wages in those years. Justice Corrigan seems to ignore the import of her own observation that “plaintiff’s work as the sole empl oyee of his corpo ration resulted in no income— but only overall losses—to the corporation.” 19 The losses ultim ately belonged to the corporation, not to plaintiff.

18 Post at 5. 19 Post at 5.

7At its core, Justice Corrigan’ s position would accomplish a de facto piercing of the corporate veil. It woul d do this even thoug h the shareholder had not engaged in fraudulent or wrongful conduct that would justify a court’s ignoring the corporat e form. It would punish plain tiff for filing an election under subchapter S, a legitimate de signation that permits him to report a loss for federal taxation purposes. Justice Corrigan indulg es in speculation that defendant created a question of material fact to d efeat summary disposition under MCR 2.116(C)(10). And she fails to explain how the undisput ed proof of plaintiff’s wages is an inaccurate reflection of his loss of income from work and how the corporation’s losses could po ssibly diminish that figure. 20
IV. A TTORNEY F EES The second issue is whet her the award of atto rney fees was proper. 21 The no-fault act provides for an award of reasonable attorn ey fees to a claimant if the

20 As noted in footnote 3 of this opin ion, plaintiff received at least $11,250 in each of the tax years in question. Thus, as a result of his work for the corporation, plaintiff earned at least $11,000 annually for his own benefit. Presumably plaintiff also paid employmen t taxes on these W- 2 wages, such as payroll taxes under the Federal Insurance Cont ributions Act, also known as FICA. Justice Corrigan does not attempt to explain how the corporation’s losses had any effect on the $11,000 in plaintiff’s bank account. 21 Plaintiff argues that defendant has waived this claim by acquiescing in the entry of the trial court’s March 7, 20 05, final judgment. This argument has no merit. Defendant has consistently obj ected to the award of attorney fees. Defendant’s approval of the entry of th e judgment did not transform the disputed issue into an unappeal able settlement or c onsent judgment. See Ahrenberg Mechanical Contracting, Inc v Howlett , 451 Mich 74, 77-79; 545 NW2d 4 (1996).

8insurer unreasonably refuses to pay the claim. Speci fically, MCL 500.3148(1) provides: An attorney is entitled to a reasonable fee for advising and representing a claimant in an ac tion for personal or property protection insurance benefits which are overdue. The attorney’s fee shall be a charge against the insu rer in addition to the benefits recovered, if the court finds that the insurer unreasonably refused to pay the claim or unreasonably dela yed in making proper payment. The purpose of the no-fault act’s atto rney-fee penalty provis ion is to ensure prompt payment to the insured. 22 Accordingly, an insurer’s refusal or delay places a burden on the insurer to justify its refusal or delay. 23 The insurer can meet this burden by showing that the refusal or dela y is the product of a legitimate question of statutory construction, constitu tional law, or factual uncertainty. 24 The trial court correctly set forth this rule of law in determining that plaintiff was entitled to attorney fees. The issue is whether it clearly erred in applying this rule and finding that defendant’s refusal was not based on a legitimate question of stat utory construction, constitutional law, or factual uncertainty. The determinative factor in our inquiry is not whether the insurer ultimately is held responsible for benefits, but whether its initial refusal to pay was unreasonable.

22 See Michigan Ed Employees Mut Ins Co v Morris , 460 Mich 180, 200 n 12; 596 NW2d 142 (1999). 23 Attard v Citizens In s Co of America , 237 Mich App 311, 317; 602 NW2d 633 (1999). 24 Gobler v Auto-Owners Ins Co , 428 Mich 51, 66; 404 NW2d 199 (1987).

9Plaintiff sought work-loss benefits under MCL 500.3107(1)(b), which

states: (1) Except as provided in subs ection (2), personal protection insurance benefits are paya ble for the following: * * * (b) Work loss consisting of lo ss of income from work an injured person would ha ve performed during the first 3 years after the date of the accident if he or she had not been injured. In order to be entitled to benefits under this section, a plaintiff must suffer a loss of income. Plaintiff in this case provi ded W-2 forms and asserted that they adequately represented his income. He made this clai m despite the fact that he was the sole shareholder and sole employee of a subcha pter S corporation that had lost more money then it paid him in wages. Defenda nt asserted that co rporate losses must be considered when calcul ating “income” for a sole sh areholder who is also the sole employee. Defendant’s argument presents an issue of first impression. In support of the argument that plaintiff was not entitled to work-loss benefits, defendant relied on the Court of Appeals decision in Adams v Auto Club Ins Ass’n.
In Adams , a motor vehicle accident permanently disabled the plaintiff. At the time of the accident, he was a self-em ployed cosmetologist who worked as an independent contractor. He paid 41 percent of his weekly gross revenue as chair rental and was also require d to pay all of his own business expenses, including expenses for supplies and materials. When he applied for work -loss benefits after

10the accident, the defendant insurance company initially approved the payment of 85 percent of the plaintiff’s average daily gross receipts. Approximately one year later, however, the defendant decided that the plaintiff was en titled to only 85 percent of his net receipts. The plaintiff br ought suit, claiming that benefits should be calculated on the basis of his averag e daily gross receipts. The defendant argued that it should be a llowed to deduct the plainti ff’s business expenses in calculating his work-loss benefits. 25 The Court of Appeals began its analysis in Adams by noting that the issue to be decided was the proper method fo r calculating work-loss benefits under MCL 500.3107(1)(b). 26 The Court noted that the stat ute allows an in jured party to collect benefits for “loss of incom e” but does not define that phrase. 27 The Court of Appeals examined the statutory langu age, Michigan preced ent, and decisions from sister states. It deci ded that, under the facts of the case, the term “loss of income” contemplated deducting the plai ntiff’s business expenses from his gross income in order to determ ine his work-loss benefits. 28 The Court determined that this procedure was necessary to avoid awarding the plain tiff more in be nefits than he would have taken home from his job had he been able to work. 29 The Court

25 Adams , 154 Mich App at 190. 26 Id

. 27 Id. at 191. 28 Id. at 192-193. 29 Id. at 193.

11was satisfied that this result was consiste nt with the no-fault act’s goal of placing individuals in the same, but no better, position than they were before their accidents. 30 In this case, defendant relied on Adams. It argued that, because plaintiff was the sole shareholder and employee of Michigan Packing an d the company lost more than it paid plaintiff in wages, plaintiff was not entitled to work-loss benefits. He suffered no lo ss of income. Defendant a sserted that the benefit

calculation methodology set forth in Adams applies whenever a self-employed person is involved. Its theory was th at, because a self-em ployed individual is solely responsible for profits and losses, the losses should be considered when determining whether there was a loss of income. Otherwis e, defendant contended, plaintiff will end up in a better position financially than he was before the accident. We acknowledge that this case differs from Adams in that the plaintiff in Adams was an unincorporated independent contractor, whereas Michigan Packing is incorporated. However, the inquiry is not whether d efendant is responsible for the benefits, but onl y whether defenda nt’s refusal to pay th em was unreasonable. As defendant points out, a subchapter S corpo ration does not pa y income taxes;

30 Id

.

12the business’s profits and losse s pass through to the owners. 31 Accordingly, because the profits and losse s of Michigan Pack ing belonged to plaintiff for tax purposes, just as they be longed to the plaintiff in Adams , defendant’s reliance on Adams was reasonable. Adams is not directly on point, and, ultimately, we do not extend its reasoning to the facts of this cas e. Nonetheless, we conclude that the trial court clearly erred in deciding that defendant’s argument was not based on a legitimate question of stat utory interpretation. As the Court of Appeals acknowledged, how to calculate the “income” of an individual in plaintiff’s situation for the purpose of determining work-loss benefits is an issue of first impression. 32 Because MCL 500. 3107(1)(b) does not define the term “loss of income,” we c onclude that it was reasonable for defendant to rely on the factually similar Adams decision. Its positi on that, in calculating plaintiff’s loss of income, the losses su ffered by Michigan Pa cking should be subtracted from the wages paid to plai ntiff had support in law and fact.
V. C ONCLUSION The issues we decide in this case are whether plaintiff was properly awarded work-loss benefits and whether defendant’s refusal to pay work-loss benefits was reasonable. The trial court held that plaintiff was entitled to benefits. It also awarded attorney fees after finding that defendant’s refusa l to pay benefits

31 See Holmes v Dep’t of Reven ue & Taxation Director , 937 F2d 481, 484 (CA 9, 1991). 32 Ross , 269 Mich App at 360.

13was not reasonable. The Cour t of Appeals affirmed on bo th issues. We affirm the award of benefits but revers e the award of attorney fees . Although defendant was ultimately responsible for paying the be nefits, its refusal to pay was not unreasonable. Defendant relied on a factually similar Court of Appeals decision to adopt a reasonable position on an i ssue of first impression.

Marilyn Kelly Clifford W. Taylor Michael F. Cavanagh Robert P. Young, Jr.

14v S T A T E O F M I C H I G A N SUPREME COURT

RANDALL L. ROSS, Plaintiff-Appellee,
No. 130917 AUTO CLUB GROUP, Defendant-Appellant.

KELLY, J. ( concurring ). In her partial dissent, Justice Corrigan asserts that my position in this case is inconsistent w ith my position in Kirksey v Manitoba Pub Ins Corp

. 1 She is incorrect. The plaintiff in Kirksey was an independent cont ractor. In this case, plaintiff is not an independent contractor; he is employed by a corporation. My colleague fails to recognize that this ma terial difference distinguishes the case at bar not only from Kirksey , but from the other cases sh e discusses, as well.

Marilyn Kelly

1 Kirksey v Manitoba Pub Ins Corp, 191 Mich App 12; 477 NW2d 442 (1991).v S T A T E O F M I C H I G A N SUPREME COURT

RANDALL L. ROSS, Plaintiff-Appellee,
No. 130917 AUTO CLUB GROUP, Defendant-Appellant.

WEAVER, J. ( concurring in part an d dissenting in part ). I concur in and join parts I, II, a nd III of the majority ’s opinion affirming the award of work-loss be nefits to plaintiff. I dissent from part IV of the majority’s opinion reversing the award of attorney fees for plaintiff. I agree with the reasons stat ed in the Court of Appeals opinion for concluding that the trial c ourt did not clearly err by awarding plaintiff attorney fees for defenda nt’s unreasonable failure to pay plaintiff’s claim for work-loss benefits.

Elizabeth A. Weaverv S T A T E O F M I C H I G A N SUPREME COURT

RANDALL L. ROSS, Plaintiff-Appellee,
No. 130917 AUTO CLUB GROUP, Defendant-Appellant.

CORRIGAN, J. ( concurring in part and dissenting in part ). I concur in part IV of the majority’s decision, which rev erses the award of attorney fees to plaintiff. I respectfully dissent, how ever, from the majority’s conclusion in part III that plaintiff’s W-2 wages estab lished compensable loss of income from work under § 3107 of the no-fault act, MCL 500.3107(1)(b). Plaintiff was the sole owner and sole employee of a subchapter S corporation that he operated at a loss that exceeded hi s wages. To establish compensable “loss of inco me from work” under MCL 500.3107(1)(b), plaintiff merely provided evidence th at he paid himself W- 2 wages. Defendant persuasively argues that plaintiff’s W- 2 wages were not a tr ue measure of his income from work because pl aintiff’s work resulted in no actual income , but only created losses. Further, b ecause of the unique tax st atus of S corporations, plaintiff reported the corporate losses on hi s personal tax returns and, as a result, paid no income tax on his wages. The no-fault act explicitly recognizes therelationship between income from wo rk and taxable income in MCL 500.3107(1)(b), which prov ides that, generally, “[b] ecause the benefits received from personal protection insu rance for loss of income are not taxable income, the benefits payable for such loss of inco me shall be reduced 15% . . . .” Under these circumstances , for our purposes, the W-2 is a meaningless form that merely reflects the cash flow plaintiff allowe d himself from a business that generated no income from work. Reimbursing him for this lost cash flow would, therefore, subsidize his preexis ting business losses; it would not compensate him for actual lo ss of income from work. I acknowledge that plaintiff and his corporation have separate legal identities. See ante at 6-7. But this fact does not alleviate plaintiff’s burden to es tablish, as a matter of fact, that he suffered loss of income from work. Because defendant created a genuine issue of material fact regarding whet her plaintiff can establish any “loss of income from work an injured p erson would have performed,” MCL 500.3107(1)(b), I would reverse and remand this cas e to the trial court fo r further proceedings.
I. STANDARD OF REVIEW This Court reviews de no vo a trial court’s decision granting or denying a motion for summary disposition. City of Taylor v Detroit Edison Co, 475 Mich 109, 115; 715 NW2d 28 (200 6). This case involves a question of statutory interpretation, which we also review de novo. Haynes v Neshewat, 477 Mich 29, 34; 729 NW2d 488 (2007). The goal of statutory interpretation is to effectuate the Legislature’s intent as demonstrat ed by the text of the statute. Casco Twp v

2Secretary of State, 472 Mich 566, 571; 701 NW2d 102 (2005). “If the statutory language is unambiguous, the Legislature is presum ed to have intended the meaning expressed in the statute and judi cial construction is not permissible.” Id.
II. ANALYSIS The no-fault act describes the benefits available for “work loss” in pertinent part as those for [ w ] ork loss consisting of loss of inco me from work an injured person would have performed during the first 3 years after the date of the accident if he or she had not been injured . Work loss does not include any loss after the date on which the injured person dies. Because the benefits received from personal protection insurance for loss of income are not taxable income , the benefits payable for such loss of income shall be reduced 15% unless the claimant presents to the insurer in support of his or he r claim reasonable proof of a lower value of the income tax advantage in his or her case, in which case the lower value shall apply. [MCL 500.3107(1)(b) (emphasis added).] “Work-loss benefits replace income that a claimant would have earned had he not been injured.” Popma v Auto Club Ins Ass'n , 446 Mich 460, 472; 521 NW2d 831 (1994). These benefits “are meant primarily to provide claimant s with simple income insurance and are inte nded to compensate clai mants approximately dollar for dollar for the amount of wages lost be cause of the injury or disability.” Id. Compensable work loss is not always measured by reference to a claimant’s preaccident wages, however. The statute defines “work loss” not as “lost wages,” but as “loss of income from work .” MCL 500.3107(1)(b) (emphasis added). In accord, for example, an independent c ontractor may seek wo rk-loss benefits because “work loss includes no t only lost wages, but al so lost profit which is

3attributable to personal effo rt and self-employment.” Kirksey v Manitoba Pub Ins Corp , 191 Mich App 12, 17; 477 NW2d 442 (1 991). Most significantly, “[i]n all cases, claimants are left to their proofs.” Popma, supra at 472. A plaintiff “will not be allowed to manipulate the statutory scheme to avoid this burden of proof.” Id. As noted, plaintiff is the sole sh areholder and sole employee of an S corporation. Shareholders of a small- business corporation may elect for the corporation to be treated as an S corporation under su bchapter S of the Internal Revenue Code. 26 USC 1361(a)(1); 26 USC 1362(a)(1). An S corporation is generally not taxed directly by the federal government. 26 USC 1363(a). Instead, its tax liabilities and deductions, including in come and losses, pass through to the individual shareholders on a pr o rata basis. 26 USC 1366. “The effect is to treat electing corporations more like partners hips, since partnership income flows through to the partners a nd is taxed accordingly.” Chocola v Dep’t of Treasury, 422 Mich 229, 236; 369 NW2d 843 (1985). Plaintiff’s corporation reported overa ll losses that exceeded plaintiff’s wages in 2001, 2002, and 20 03. He listed the corpora tion’s losses on his personal income tax return. Accordin gly, defendant offered as ev idence the opinion of an accounting expert who concluded that, alt hough plaintiff reporte d W-2 wages, he suffered no actual loss of inco me from work. Defendant argues that, under these circumstances, plaintiff sh ould not be treated as a wage-earning employee of a distinct corporation. Rather, plain tiff’s yearly income from work should be

4calculated by subtracting his business e xpenses from his gross receipts, as was done in Adams v Auto Club Ins Ass’n, 154 Mich App 186; 397 NW2d 262 (1986)

. As the majority explains, ante at 12, the Adams panel acknowledged that the “goal of the no-fault act is to place individuals in the same, but no better, position than they were before th eir automobile accident.” Adams, supra at 193. It opined that the self-em ployed “plaintiff [could] not claim that his actual expendable income included even that inco me which he was required to pay out as business expenses.” Id. Therefore, to avoid overcompen sating the self-employed plaintiff in Adams , it was appropriate to conduct a factual inquiry into whether certain business-related expens es should be deductible fo r purposes of determining work-loss benefits. Id. at 193-194. I agree with defendant and find Adams applicable. Here, plaintiff operated his business at a loss that exceeded his W-2 income, and he reported his corporate losses for tax purposes. Indeed , plaintiff and his wife had no taxable income in 2001, 2002, and 2003. Most significantly, plaintiff’s work as the sole employee of his corporation resulted in no income —but only overall losses— to the corporation. The expert opinion offered by defendant, which recounted these facts and conclusions, created a genuine issue of ma terial fact regarding whether plaintiff can establish any “loss of income from work an injured person would have performed . . . .” MCL 500.3107(1)(b). Put othe rwise, defendant created a genuine issue of material fact with regard to whether plaintiff’s W-2 wages constituted a correct measure of hi s loss of income from work.

5In adopting the reasoning of the Court of Appeals in this case, the majority stresses that, to the contrary, plaintiff should merely be t reated as any employee of a corporation that is operating at a loss. Ante at 6-7. But plaintiff cannot be compared directly to an employee of any co rporation that is operating at a loss. Employees of subchapter C co rporations receive real income, which is in no way offset by corporate losses, and must pay income taxes on thei r wages regardless of whether the corporation, itself, operates at a loss. Here, plaintiff used the S corporation’s losses to offset his wages and, as a result, he was relieved from paying any federal in come tax. Further, this and other courts explicitly recognize the unique nature of S corporations, which are of ten more comparable to p artnerships than to corporations. Chocola, supra at 243 (“Subchapter S co rporations enjoy unique characteristics that provide a compelling analogy to p artnerships, which produce apportionable business income in the hands of member partners . . . .”); Tetlak v Village of Bratenahl, 92 Ohio St 3d 46, 48; 748 NE 2d 51 (2001) (stating that subchapter S “treat[s] corporate income , losses, deductions, and credits as if incurred by individual shareholders in a manner akin to the tax treatment of partnerships”), citing Bufferd v Internal Revenue Comm’r , 506 US 523, 524-525; 113 S Ct 927; 122 L Ed 2d 30 6 (1993). Shareholders of an S corporation are taxed on the basis of their pro rata shares of all items of corporate income and loss, regardless of whether th e income or loss is separately computed. 26 USC 1366(a). Similarly, when it is nece ssary to compute a sharehold er’s annual gross income, it

6is calculated as his pro rata share of th e corporation’s gross income. 26 USC 1366(c). As the Ohio Su preme Court observed in Tetlak, supra at 49 , S corporations are not taxed as C corporatio ns; rather, taxable income is computed essentially as if the S corp oration were an individual. Therefore, shareholder income is characterized as if it originat ed from whatever source generated the income for the corporation. Id. ; 26 USC 1366(b). For these reasons, I conclude that a wo rk-loss claim of a sole shareholder and sole employee of an S corporation is subject to a factual inquiry concerning the actual amount of lost income from work . In a given case, I may not disagree with the majority of my colleagues that the W-2 wa ges of an employee of an S corporation may be comparable to the wages of an em ployee of a C corporation and will be the appropriate measure of loss of income from work. The facts in this case, however, reveal a sole shareholder op erating his S corporation essentially as a sole proprietorship. Here, plaintiff does not offer a principled argument that his gross income and operating expenses fail to reflect the most accurate measure of his actual income from work. Rather, he advocates a ru le treating W-2 wages as the measure of loss of inco me from work under all ci rcumstances simply because he is an employee of a corporation. By adopting such a rule, the majority t reats otherwise similarly situated sole proprietors differently on the mere basis of wh ether they choose to incorporate. Further, contrary to the majority’s assertion, ante at 8, I do not think that my position requires a “de facto piercing of the corporate ve il” in any traditional

7sense. Rather, I recognize that plaintiff’s profits or losses as the sole shareholder and sole proprietor of an S corporation may bear on whether he lost income from work as a matter of fact. Moreover, to any extent my view may be cast as requiring us to pierce the corp orate veil, it is not at all clear that doing so would be inappropriate under these circumstances. As I have observed on more than one occasion, this Court has failed to es tablish clear standards for piercing the corporate veil. See L & R Homes, Inc v Jack Ch ristenson Rochester, Inc, 475 Mich 853 (2006) (Corrigan, J., dissenting) . As the Court of Appeals observed in Kline v Kline , 104 Mich App 700, 70 2-703; 305 NW2d 297 (1 981), this Court has historically treated corporations an d sole shareholders “as one for certain purposes,” in part because the “ficti on of a corporate en tity different from the stockholders themselves was introduced fo r convenience and to serve the ends of justice, but when it is invoked to subvert the ends of justice it should be and is disregarded by the courts.” “Each case i nvolving disregard of the corporate entity rests on its own special facts.” Id. at 703. 1

1 The Kline Court’s full discussion follows: Complete identity of interest between so le shareholder and corporation may lead courts to treat them as one for certain purposes. Williams v America Title Ins Co , 83 Mich App 686; 269 NW2d 481 (1978). Where the cor poration is a mere agent or instrumentality of its sharehold ers or a device to avoid legal obligations, the corporate entity may be ignored. People ex rel Attorney General v Mich igan Bell Telephone Co , 246 Mich 198, 205; 224 NW 438 (1929). A court may look through the veil of corporate structure to av oid fraud or injustice. Schusterman v (continued...)

8Most significantly, a rule treating W- 2 wages as the measure of loss of income from work under all ci rcumstances is not consiste nt with the no-fault act’s intent to compensate fo r the actual loss of work-rel ated income caused by an accident. The no-fault act “is not designed to prov ide compensation for all economic losses suffered as a result of an automobile accident injury.” Belcher v Aetna Cas & Surety Co, 409 Mich 231, 245; 293 NW2d 594 (1980). Michigan courts have consistently en gaged in factual inquiries to determine the true measure of an injured person’s compensable accide nt-related losses. For instance, in MacDonald v State Farm Mut Ins Co , 419 Mich 146, 150; 350 NW2d 233 (1984), the plaintiff’s injuries from a car accident would have prevented him from working for a period of 28 months. During that peri od, however, he suffered a

(...continued) Employment Security Comm , 336 Mich 246; 57 NW2d 869 (1953). The community of interest between corporation an d shareholders may be so great that, to meet the pur poses of justice, they should be considered as one and the same. L A Walden & Co v Consolidated Underwriters , 316 Mich 341, 346; 25 NW2d 248 (1946). When the notion of a corporation as a legal entity is us ed to defeat public convenience, justify a wrong, protect fraud or defend crime, that notion must be set aside and the corporation treated as the individuals who own it. Paul v Univ Motor Sales Co , 283 Mich 587, 602; 278 NW 714 (1938). The fiction of a corporate entity different from the stockholders themselves was introduced for convenience and to serve the ends of justice, but when it is invoked to subvert the ends of justice it should be and is disregarded by the courts. Paul, supra . A court's treatment of a co rporate entity clearly rests on notions of equity, whether it is an action at law or at equity. Each case involving disregard of the corporate entity rests on its own special facts. Brown Bros Equip Co v State Hwy Comm , 51 Mich App 448; 215 NW2d 591 (1974). [ Id. at 702-703.]

9heart attack that disabled him from work for an indefinite amount of time. Id. This Court examined the language of former MCL 500.3107(b ), a predecessor of MCL 500.3107(1)(b), both vers ions of which nearly are iden tical to § 1(a)(5)(ii) of the Uniform Motor Vehicle Accide nt Reparations Act (UMVARA). Id. at 151. We observed that, “by adopting the language of such a model act , it is evident that the Legislature ‘was cogn izant of, and in agreement with, the policies which underlie the model acts’ language’.” Id., quoting Miller v State Farm Mut Automobile Ins Co, 410 Mich 538, 559; 302 NW2d 537 (1981). Accordingly, we found the comments to § 1(a)(5) of the UMVARA rele vant to Michigan’s act. MacDonald, supra at 151. The relevant comments read: “Work loss”, as are the other components of loss, is restricted to accrued loss, and thus covers only actual loss of earnings as contrasted to loss of earning capac ity. Thus, an unemployed person suffers no work loss from injury until th e time he would have been employed but for his injury. On the other hand, an employed person who loses time from work he would have perform ed had he not been injured has suffered work loss * * *. Work loss is not restricted to the injured person's wage level at the time of injury . For example, an unemployed college student who was permanently disabled could claim loss, at an appropriate time after the injury, fo r work he would then be performing had he not been injured. Conversely, an employed person's claim for work loss would be appropriately adjusted at the time he would have retired from his employment.” [ Id. , quoting the comments to § 1 (a)(5) of the UMVARA, found in 14 ULA 46-47.] Both the clear language of former MCL 500.3107(b) and the comments to the UMVARA led the MacDonald Court to conclude “tha t work-loss benefits are available to compensate only for that am ount that the injured person would have received had his automobile accident not occurred.” Id. at 152. The plaintiff’s

10wages before the accident were not an automa tic, true measure of his ongoing loss. Rather, the plaintiff “would have worked and earned wages for two weeks, until the date of his heart attack. After that date plaintiff would have earned no wage even had the accident not o ccurred and, therefore, [he was] ineligible for work

loss benefits after that date under § 3107(b).” Id. The import of the MacDonald Court’s decision was to “allow insurers to use the act as it was intended and avoid paying compensation not due the claimant .” Id. at 154 (emphasis added). This Court employed sim ilar reasoning, and relied on MacDonald, to hold in favor of the plaintiff in Marquis v Hartford Acci dent & Indemnity (On Remand) , 444 Mich 638; 513 NW2d 799 (1994). There, the plaintiff was injured in an accident and alleged that her resulti ng temporary injury ca used her to lose her job. During her peri od of disability, her job was offered to a permanent replacement employee. She wa s then unable to find a job that paid a similar

amount. Id. at 640. She alleged that, although her p eriod of disability had ended, she qualified for full work-loss benefits during the statutory three-year period because, but for the accident , she would have remained employed in h er previous position. Id. at 642. This Court agreed that, although the availa bility of lower

paying work coul d be considered in term s of the plaintiff’s obligation to mitigate her damages, she had created a genuine i ssue of material fac t regarding whether the accident was the but-for cause of h er loss of income at a higher wage. Id. at 649-650.

11In sum, this Court has consiste ntly condoned carefu l factual inquiry regarding the true measure of actual income lo st as a direct resu lt of an automobile accident. I also find it striking that Justice Kelly hersel f employed reasoning similar to that of the MacDonald and Marquis courts as the author of the Court of Appeals opinion in Kirksey. In Kirksey, she was presented with a plaintiff independent contractor who wa s injured while wo rking for a trucking company. Kirksey, supra at 13-14. At the time of his in jury, the plaintiff had the option of working for a second trucking company, which guaranteed him more hours and pay, if the first company was unable to fulfill its pr omises of more hours and certain benefits. Id. at 13. The plaintiff claimed that, because th e first company offered him reduced hours at the time of his injury, the amou nt of his loss of income from work should not have been based on his earn ings at the time of the accident. Rather, because he would have returned to work full-time at the second company but for his accident, his benefits should have been ba sed on his earnings during his previous work wi th the second company. Id. at 14. Judge Kelly recognized that wages alone are not alwa ys a measure of loss of income from work; rather, an inde pendent contractor such as the plaintiff could seek work-loss benefits because “work loss in cludes not only lost wages, but also lost profit which is attributable to personal effort and self-employment.” Id. at 17. I note that this comment directly reflects the comments to § 1(a)(5) of the UMVARA, which comments state, in part: “W ork loss includes not only lo st wages, but lost profit which is attributable to personal effort in self-empl oyment (as distinguished from

12profit attributable from investme nt) . . . . [T]he issue is whether claimed work loss is justly attributable to the injury. ” 14 ULA 47 (emphasis added). In Kirksey , Judge Kelly held that the plaintiff’s earnings at the time of his accident were not necessarily the true measure of his loss of income as a result of the accident. Kirksey, supra at 16. Rather, if a jury were to find that, absent his injury, the plaintiff would have earned a higher income from the s econd company, his loss of income from work might be prem ised on that higher income. Id. I am unable to square the majority’s holding in this ca se with Michigan jurisprudence, including MacDonald, Marquis, and Kirksey. The clear import of the no-fault act and these cas es interpreting it is that an injured plaintiff may recover work-loss benefits on the basis of his actual loss of income, as reflected by the factual record. 2 Accordingly, I cannot agree with the majority’s decision to establish a rule that, just because a sole proprietor in corporates his business, he will be treated differently than a sole propr ietor with the same actual income and

2 Because actual loss as a matter of fact is the central inquiry, Justice Kelly’s attempt in her concurri ng opinion to distinguish the Kirksey plaintiff on the basis that he was an independent contractor, ante at 1, is inapposite. Further, a hypothetical example involv ing an independent contractor illustrates my overall point. What if an independent contractor, such as the one in Kirksey, chooses to incorporate and file as an S corporation for tax or liability reasons, thereby becoming the sole sharehol der, sole proprietor, and sole employee of a company that hired out his services? As a fact ual matter, how would his actual income earned from work change as a mere result of his changing his legal status? Why would his actual W-2 wages automatically become a more accurate measure of his income upon inco rporation?

13losses. 3 I would hold that plaintiff did no t meet his burden to prove his actual amount of work loss merely by submitting his yearly W-2 wa ge amounts. Rather, because defendant showed that plainti ff operated his S corporation at a loss, defendant created a genuine issue of mat erial fact concerning the amount, if any, of plaintiff’s actual loss of income fro m work. I would rev erse the Court of Appeals judgment affirming summary di sposition under MCR 2.116(C)(10) in plaintiff’s favor and remand this case to th e trial court. I would further require plaintiff to offer proof on remand of the true measure of income from work that is necessary to put him in the same, but no better, position than the one he occupied before his accident.
Maura D. Corrigan Stephen J. Markman

3 Farm Bureau Mutual In surance Company of Mich igan raises a similar problem in its amicus curiae brief

. It notes that injured , self-employed farmers may not be able to prove actual loss of income after an automobile accident. Therefore, farmers may elect to add replacement-labor endorsements to their no

fault policies. Such endorsements requi re an insurer to pay for farmer replacement labor in the event of a disabling acci dent. Farm Bureau reasonably asks why plaintiff should receive replacement wages fo r work he performed that resulted in a loss when he is not required to elect and pay for a comparable endorsement.

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